The 5x vs. 12x Divide: Why Mid-Market Agencies Trade at Discounts (and How to Escape Them)

Two agencies. Same revenue. Same client list. Same market.
One sells for 5x EBITDA.
The other commands 12x.

That’s the valuation divide shaping the agency landscape in 2025, and most founders don’t even realise which side they’re standing on.

Mid-market agencies are trading at an average of 5.2x EBITDA, while their tech-enabled peers are fetching 8–12x, according to Moore Kingston Smith’s latest M&A report.

The difference isn’t creativity.
Its capability, the infrastructure and technology make value transferable when founders exit.

In a world where every agency claims to be “strategic,” “data-driven,” or “integrated,” only a few have built the systems that buyers can actually underwrite.

The result?
A widening valuation gap between agencies that look good on paper and those that can stand up to diligence.

The irony is that the most fragile agencies are often the busiest.
They’re winning work, delivering campaigns, and driving revenue, but underneath, they’re running on manual processes, patchwork tools, and heroic founders.

Three traps explain why the mid-market so often stalls at 5x multiples:

1. No Scalable Systems
   Most agencies rely on their founders' muscle memory.
   Processes live in inboxes and Slack threads, not systems. When buyers ask for proof of repeatability, there’s none to offer. Without process, there’s no predictability, and without predictability, there’s no premium.
   
   
2. Weak Tech Integration
   Tools are everywhere, but they’re rarely embedded.
   Agencies trial AI or automation in pockets, but few operationalise them. Efficiency gains stay theoretical. Buyers see it immediately: tech as cost, not capability.
   
   

Margin Volatility
Procurement pressure is squeezing traditional agencies down to 16% margins.Without automation or pricing discipline, cost-to-delivery creeps up every quarter. When buyers model future earnings, they price in the instability, and valuations fall accordingly.

Every founder believes their agency is the exception, that creativity, culture, and client relationships will outweigh process in valuation.

But when it comes to M&A, relationships don’t get priced in. Systems do.

In diligence, the questions are brutally simple:

• Can this business scale without the founder?
  
  
• How predictable is revenue month to month?
  
  
• How efficient is delivery compared to peers?
  
  
• What’s the defensible edge, data, tech, IP?
  
  

If the answers aren’t documented, standardised, and proven, buyers apply a risk discount.
That’s how good agencies become 5x agencies.

Here’s the uncomfortable truth:
You can’t out-sell a weak system.

More revenue doesn’t fix inefficiency. It compounds it.
More hires don’t solve process gaps. They magnify them.

Scaling without infrastructure is like pouring fuel on sand.

That’s why we tell founders: you don’t move from 5x to 12x by growing faster.
You do it by building smarter.

At Unusual Group, we’ve helped dozens of founders close the gap between fragility and premium valuation.
The agencies that make the leap share three traits:

1. AI-Enabled Efficiency
   We embed automation into client reporting, forecasting, and delivery, the unglamorous backbone of agency life.
   The result? A 30% efficiency uplift in ten weeks.
   Not theory. Practice. Buyers see that in the numbers, not the pitch deck.
   
   
2. Shared Services That Scale
   Finance. HR. Legal. Compliance.
   Mid-market agencies rarely invest early enough in these functions. By sharing them across the Unusual Collective, our partners cut overheads while gaining enterprise-grade systems that make them buyer-ready years in advance.
   
   
3. Margin Discipline as a Culture
   Growth without margin isn’t growth, it’s drift.
   The agencies that hit 20–22% EBITDA margins don’t get there through random cost cuts. They build predictable revenue, protect delivery efficiency, and hardwire financial discipline into leadership decisions.
   

Each of these levers compounds the next.
‍

Efficiency drives margin.
Margin attracts capital.
Capital funds infrastructure.
Infrastructure multiplies valuation.

That’s the real growth loop, not just bigger clients, but better economics.

We worked with an agency turning over £4.8m with strong client retention but no scalable systems.
Projects were profitable, but reporting, delivery, and leadership all bottlenecked at the founder.
They were valued at around 5x EBITDA.

Within 18 months, we embedded automation into reporting, moved 60% of revenue to retainers, and built a senior bench around the founder.
Their EBITDA margin rose from 17% to 23%, and they’re now negotiating deals north of 10x.

Same clients. Same creative output.
Different infrastructure, and a different price tag.

By the time you’re thinking about selling, it’s already too late to build infrastructure from scratch.
Buyers are looking for plug-and-play operations, agencies that can be integrated without chaos.

When they see:

• AI integrated into delivery
  
  
• Documented systems
  
  
• Predictable margins
  
  
• Leadership beyond the founder
  

They pay for certainty.
That’s the leap from 5x to 12x.

At Unusual, we call this the Valuation Architecture, the invisible structure that turns busy agencies into bankable ones.

It’s built into our Unusual Method™, an eight-phase roadmap from growth to exit, distilled from more than £200M in founder exit value.

Our focus is simple:
Embed efficiency, build defensibility, and make scale inevitable, long before buyers ever enter the conversation.

We don’t chase financial engineering.
We engineer infrastructure.

Because that’s what turns 5x agencies into 12x ones.

The valuation divide isn’t about who works harder. It’s about who builds smarter.

Agencies that remain trapped in project chaos and manual operations will keep trading at a discount.
Agencies that embed technology, infrastructure, and margin discipline early will command premiums buyers can’t ignore.

In other words:

“Creativity wins clients. Infrastructure wins exits.” Luke Tobin, CEO, The Unusual Group.

Take The Unusual Group’s Exit Readiness Assessment or book a confidential conversation about how to shift your agency from the discount pile to the premium pile.

‍